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As airport taxes continue to soar coupled with the rising price of crude oil, the International Air Transport Association (IATA) has expressed concerns over the twin issues that could slow down air travel recovery in an industry that has been ravaged by COVID-19.
Worried by the situation, which makes airlines pass the cost of airport charges and the high cost of aviation fuel, otherwise, known as JET A1, to passengers, the clearing-house for over 190 global airlines expressed satisfaction with the resilience of the sector to bounce back from the pandemic.
Among countries that have increased airport taxes are Nigeria, Schipol Airport, Amsterdam, United Kingdom, United States, and some others that have skyrocketed airfares and further worsened by the high cost of crude oil in the international market to $82, the highest in recent times. The United Kingdom airport tax is as high as £189.
The most expensive taxes for a long-haul flight are from an airport in Russia, a study by UHY found last year. Passengers taking a long-haul trip pay as much as $272,
Last year, Australia ranked 127 out of 140 countries in terms of ticket taxes and airport charges in the World Economic Forum Travel and Tourism Competitiveness Report.
The Federal Airports Authority of Nigeria (FAAN), the managers of over 24 airports across the country, had late last year increased the Passenger Service Charge (PSC) payable by air travellers on local and international flights by 100 percent.
Nigeria’s air passenger taxes are among the highest in the world, according to a new study by the international accountancy network, UHY.
Aside from the $100 PSC levied on international passengers exiting through any of its international airports, passengers also pay $20 security tax, which was introduced after underwear bomber, Umar Farouk Abdulmutallab, attempted to blow up a United States airliner.
There are other hidden taxes and charges which make international carriers operating into Nigeria charge more. Nigerian routes are said to be one of the costliest in the world as fares to Lagos/ Abuja from London, for instance, are far more expensive than London to Accra, Ghana which is the same equidistance of about six hours.
A worker with one of the European carriers, who spoke to Aviation Metric on strict condition of anonymity, lamented that the high cost of operations, high taxes by the government, and the airport authority made airfare to Nigeria to be among the highest in the world.
The source further stated that most times when these happen, the costs are passed to travelers, stressing that airlines are burdened by the huge cost of operations in Nigeria.
According to him, “doing business in Nigeria is not easy. Most of the time like it is in many other climes, huge taxes and other costs are pushed down to the passengers as the airlines’ profit is marginal and cannot absorb all these costs.”
The new regime of N2,000 from N1,000 and $100 from the initial $50 per passenger commenced on August 1, 2020, and saw the rise in airfares on both domestic and international routes as the carriers passed the cost to passengers.
The FAAN explained that the cap on the value of the PSC was simply outdated as the last review of PSC on the domestic route from N350 to N1000 and from $35 to $50 on the international route was on May 1, 2011, and 21 March 2011, respectively.
Director-General of IATA, Willie Walsh, at a virtual meeting monitored by our correspondent, said, “It is irresponsible” that Schiphol is increasing airport charges by 37 percent in the middle of a crisis.
It is insulting that the airport is positioning a token five percent reduction in their demands (originally 42%) as a response to the needs of their customers.
“It is nonsense that most of the airports that have increased airport taxes/ charges are justifying the increase to encourage a more sustainable aviation sector. Penalizing airlines with higher airport charges does nothing to move the sector towards its net-zero goals.
“The profitability of the industry is way too small and profit almost non-existent. They get taxed because they are looking at the revenue line rather than the profitability.”
The IATA chief equally did not spare other nations that have raised airport charges particularly African nations whom he said see taxes as purely a source of revenue.
According to him, “taxation is huge, costs of operation, which makes the cost of profits marginal or nonexistent. I think what they do is to look at the revenue line, but they failed to recognise costs associated with operations in this industry.”
He disclosed that the price of crude oil which oscillates between $80 and $82 which he described as ‘staggering’ would increase airfares, stressing that the principle of demand and supply would play as well.
On the high cost of fuel, Walsh noted that Sustainable Aviation Fuel (SAF), otherwise known as Biofuel could help to stem the high of aviation fuel for airline operators only if the carriers get enough supply. Jet fuel production is one of the airlines’ biggest expenses along with labor.
He stated that the quantity of SAF available today can only operate 50 percent of flights, stressing that governments need to incentivize the production of Biofuel to ensure a huge cut on JET A1 prices.
IATA member airlines and the wider aviation industry are collectively committed to ambitious emissions reduction goals.
Sustainable Aviation Fuels (SAF) have been identified as one of the key elements in helping achieve these goals. Governmental support is essential to using sustainable aviation fuels to achieve the industry’s climate goals.
Statistics from IATA show that over 370,000 flights have taken to the skies using SAF since 2016 with the existence of seven technical pathways.
The clearinghouse to global airlines disclosed that 100 million litres of SAF will be produced in 2021 as SAF can reduce emissions by up to 80% during its full lifecycle with around 14 billion litres of SAF are in forwarding purchase agreements.
A former Chief Executive Officer of Virgin Nigeria, Capt. Dapo Olumide said many airports in the developed world raised airport charges because they needed to recoup funds to plow back to the development of the aerodrome since they do not get intervention funds from either the government or from any other source.
He said unlike Nigeria and other African countries where the money made from airport taxes is not accounted for or plowed back, it becomes more curious to ask questions because of the appalling or poor quality service, adding that increase in airport taxes or passenger taxes would surely lead to the fare increase.
“In cases like this, airlines will pass the costs to travelers to remain in operation. The majority of people cannot even afford it as it is today. What it means is that you are giving business to bus operators.Google+